A California attorney specializing in real estate law has been sentenced to two years in prison after he was found guilty of a fraudulent short-sale scheme. According to evidence presented at trial, Robert Farrace, of Modesto, formed and controlled Dignitas, LLC, but listed a friend’s name on paperwork as a nominal manager because he knew the bank foreclosing on his properties would not sell to a related party.

Farrace then submitted short sale offers to the bank that serviced the loans on both properties, listing Dignitas and the nominee manager as the purchaser. Farrace misrepresented his relationship to Dignitas to induce the bank to approve the short sale.

Guilty of three counts of wire-fraud in connection with the scheme

Because the servicing bank did not know of the true relationship, it went forward and completed one of the short sales. The short sale on the second property was stopped after law enforcement informed the bank of Farrace’s scheme. Such maneuvering violates banks’ “arm’s length” rule when dealing with loans and short sales.

Removed as President of the Stanislaus County Bar Association

Farrace’s attorney attempted to argue that Farrace did not know what he was attempting was illegal, but prosecutors were able to show that Farrace established Dignitas, LLC with the intent of purchasing the properties from himself and he did not disclose this fact to the lender. In addition to prison time, Farrace has had his real estate broker’s license suspended and he has been removed as the President of the Stanislaus County Bar Association. Farrace can also count a failed 2007 Modesto City Council run as a once-honorable pastime tarnished by his fiduciary tomfoolery.

Farrace is currently incarcerated in a Federal Facility.

Farrace’s felonious financial finagling is reminiscent of Minerva Sanchez, a Fremont, CA real estate agent who orchestrated a short-sale ruse for a client in 2010 with precipitous observance of the arm’s length rule. Sanchez recommended that a client sell their home at short sale to Sanchez’s son, with the intention of the seller regaining ownership of the property but with a significantly smaller loan balance.

In addition to flaunting the arm’s length provisions of the transaction, Sanchez provided false documents throughout the short sale process, misrepresenting information about the seller’s liquid assets and even providing the seller with a fraudulent hardship letter which influenced the lenders’ decisions to approve the short sale. In 2014, Sanchez pled guilty and was sentenced to 21 months imprisonment and restitution fines of $421,372.

Even more egregious was the three-year ongoing arm’s length scam perpetrated in Massachusetts by Greisy Jimenez, a real-estate broker, Jasmin Polanco, a real estate closing attorney, and Vanessa Ricci, a mortgage loan officer. During the height of the housing crisis last decade, from 2007 to 2010, Jimenez, Polanco & Ricci repeatedly facilitated short-sales of properties where the buyer was routinely a relative of the seller, and the seller never even moved out of their home. Polanco and Ricci pled guilty to conspiracy charges; Jimenez pled guilty to conspiracy and two charges of bank fraud. All have yet to be sentenced.

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Bruce Robertson

Bruce Robertson is a private investigator and founder of Tristar Investigation, California’s premiere detective agency. Bruce is also a media commentator for the investigation industry, featured in the New York Times, CNN, History Channel, MSNBC, Los Angeles Times and many more. You can find him on Google+ LinkedIn and YouTube.